1. what is the concept of the fundamental accounting?

The concept of fundamental accounting refers to the basic principles and guidelines that govern the
recording, reporting, and analysis of financial transactions in an organization. These principles provide a
framework for accurate and reliable financial reporting, which is essential for making informed business
decisions.

Some key concepts of fundamental accounting include:

1. Entity Concept: This concept states that the business entity should be treated as separate from its
owners or shareholders. The financial transactions of the business should be recorded and reported
separately from personal transactions.

2. Going Concern Concept: According to this concept, an organization is assumed to continue its
operations in the foreseeable future. Financial statements are prepared on the assumption that the
business will continue to operate and meet its obligations.

3. Accrual Basis Concept: Under the accrual basis of accounting, transactions are recorded when they
occur, regardless of when the cash is received or paid. This concept ensures that revenues and expenses
are recognized in the period in which they are earned or incurred, providing a more accurate
representation of the financial position and performance of the organization.

4. Matching Principle: The matching principle states that expenses should be matched with the revenues
they help generate. This ensures that the financial statements reflect the true profitability of the
organization by matching the expenses incurred in a period with the revenues earned during the same
period.

5. Historical Cost Concept: According to this concept, assets and liabilities are recorded at their original
cost when acquired. This provides a reliable and objective basis for valuing assets and determining their
subsequent changes in value.

These fundamental accounting concepts form the foundation for financial reporting and help ensure
consistency, comparability, and transparency in financial statements.

2. What are the 5 basic accounting principles and its meaning?

The 5 basic accounting principles are as follows:

1. Accrual Principle: This principle states that transactions should be recorded when they occur,
regardless of when the cash is exchanged. It ensures that revenues and expenses are recognized in the
appropriate accounting period.

2. Consistency Principle: This principle requires companies to use the same accounting methods and
principles consistently from one period to another. It promotes comparability and allows for meaningful
analysis of financial information.

3. Going Concern Principle: This principle assumes that a company will continue to operate indefinitely
unless there is evidence to the contrary. It allows for the preparation of financial statements under the
assumption that the company will be able to fulfill its obligations and continue its operations.

4. Conservatism Principle: This principle suggests that when there are uncertainties or doubts,
accountants should err on the side of caution and choose the option that understates assets and
income, and overstates liabilities and expenses. It helps to prevent the overstatement of financial
position and performance.

5. Economic Entity Principle: This principle states that the financial affairs of a business must be kept
separate from the personal affairs of its owners. It ensures that the financial statements reflect only the
activities and transactions of the business itself.

These principles provide a framework for accurate and reliable financial reporting. By following these
principles, companies can maintain consistency, transparency, and integrity in their accounting
practices.

Source: Investopedia